Idemitsu, Mitsui Consider U.S. Chemical Plant on Cheap Gas

March 18 (Bloomberg) -- Japanese oil refiner Idemitsu Kosan
Co. and trading company Mitsui & Co. will consider building a
petrochemical plant in the U.S. to take advantage of cheap
natural gas.

Idemitsu Kosan and Mitsui will carry out studies on a
project to produce 330,000 metric tons a year of alpha olefins,
which are used as additives in polyethylene and other synthetic
resins, the two companies said in a statement today. The plant
would buy ethylene from Dow Chemical Co. and sell part of its
alpha olefins output back to the biggest U.S. chemical maker,
according to the statement.

Companies including Dow and Exxon Mobil Corp. are planning
to construct petrochemical plants in the U.S. to capitalize on
lower costs. Hydraulic fracturing, or fracking, has increased
shale gas output in the country and boosted margins from making
ethylene from natural gas liquids such as ethane and propane.

The petrochemicals industry may eventually spend $30
billion on such projects because increased gas output has made
U.S. production the cheapest outside of the Middle East, Mark
Lashier, an executive vice president at Chevron Phillips
Chemical Co., said in March last year.

Idemitsu and Mitsui haven’t decided on a location for their
proposed plant or how much they will spend on the project. A
final investment decision is expected in 2014. The proposed
project is scheduled to start production in 2016, according to
the statement.

Gulf Plants

The Japanese venture’s investment in the project may reach
about 100 billion yen ($1 billion), the Nikkei newspaper
reported earlier today, without saying how it obtained the
information. It will be built next to Dow’s planned ethylene
plant in Texas, the newspaper said.

Dow operates ethylene facilities, known as crackers, in
Texas and Louisiana. It also plans to build a propylene facility
at Freeport, Texas, with an estimated start date of 2015.

The company said today that it plans to build several
plants for its performance-plastics unit on the Gulf Coast. The
move will add as many as 3,000 workers at the peak of
construction, Midland, Michigan-based Dow said in a statement.